Author:Danny M. Leipziger
Profession:Vice President and Head of the Poverty Reduction and Economic Management Network

The experiences of recent decades have shown that the countries that have most successfully integrated into the world economy also have tended to record the highest growth rates. This result should not come as a surprise. Integration brings with it improved allocation of resources, intensified competition, and pressures to raise productivity, as well as exposure to new technologies, designs, and products. With world trade growth expanding more than twice as rapidly as world gross domestic product (GDP) over the past decade, the potential rewards from participating in world trade are considerable. Increased trade openness, through lower levels of protection in developed and developing countries, has contributed to this outcome. Nevertheless, it is widely acknowledged that an open trade regime will only foster trade integration when a range of complementary policies is in place.

One of the most important complementary policies is to put in place a well functioning customs administration that provides traders with transparent, predictable, and speedy clearance of goods. Indeed, a poorly functioning customs administration can effectively negate the improvements that have been made in other trade-related areas.

For many countries, achieving efficiency and transparency in customs operations remains a formidable challenge. In 2002, over US$6.3 trillion of goods crossed international borders. Each one of those shipments passed through customs controls at least twice-at entry and at exit. Customs services have often had to cope with these growing trade volumes without any commensurate increase in staff or resources. In addition, customs administrations continue to face changes to their operating environment, which emphasize the need to adjust and modernize their processes. These include:

* more sophisticated and demanding clients, for example, traders who have invested significantly in modern logistics, inventory control, manufacturing, and information systems

* greater policy and procedural requirements associated with international commitments

* proliferation of regional and bilateral trade agreements, which significantly increase the complexity of administering border formalities and controls

* heightened security concerns and demands to respond to the threats posed by international terrorism and transnational organized crime

* widespread revenue fraud.

Many customs administrations are struggling to meet the continually increasing demands and...

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